When they assess your home loan application...

[Indadhanu]

Ok. One more question...

So we had our bank meeting, and a meeting with a broker. Something I am unclear on. I have emailed our broker who I guess will get back to us fairly quickly, but not tonight. And I am impatient, as we all know, so...

Went to the bank, they assessed our 'loan serviceability' thing with one interest rate.
Mortgage broker told us that that paritular bank asessed different home loan products differently, and told us the product that was assessed a the lowest rate.

Huh? So... when you actually apply they use a different rate then when they told you what you could be able to borrow????

[Fuzzywuzzy]

When I worked in home loans we would calculate servicability on the current standard variable rate with no discounts. This helps to account for minor interest rate increases and variability in income figures provided. Most of the time the interest rate for the product that the customer applies for is lower than the standard variable rate which means that you have more serviceability for that particular product.

It's a good thing for you because it means that you should be able to be approved comfortably on a lower interest rate. Good luck!

[Indadhanu]

So - does that mean that when they assess your application they use the higher interest rate, and then if you are approved you pay the lower rate?
OR do you apply for a home loan and it is assessed at the rate that you'll be paying?

LOL at the higher rate our maximum borrowing power thing comes out with repayments that are STILL less than the rent we are paying per month, it is CRAZY!

[Arimeh]

Fingers crossed you get approved mate. One crappy things about banks and their approval method is their own ridiculous estimate of what your outgoings are per month, especially when you have kids. I don't know where they get their figures from but it was always double what we actually spent per month, which is the reason we got knocked back for borrowing a lousy 25 grand, when we had over 70 grand in the bank as a deposit. Very frustrating!!!!!!!

[Indadhanu]

The lower limit is $2100 for two adults and one dependant, that's still more than we pay!!! The higher limit is about $2700 I think, which is more than double our monthly expenses! Ugh!

I still can't get past the fact that they won't don't into consideration that we have been paying a certain amount of rent ON TIME in advance every fortnight for over two years, and yet they still think we can't afford that. Makes absolutely no sense to me, whoever makes those bloody computer analysers needs a good talking to lol, how is a one-size-fits-all method even remotely accurate???

Bloody Henderson report LOL! (or whateer the heck it's called!)

Fingers crossed anyway.

[Mum2Romone]

St George now will give you a home loan based on paying rent ALONE ..... Maybe check them out. they offered us $400k lat year and now with the new criteria they are calling us all the time ......

BTW I don't work.... DH income is only about $70k

[Indadhanu]

Yeah we've talked to St George, they are pretty good. They don't assess a loan serviceability on rent though, they only take the rent ledgers in leui of genuine savings.

LOL M2R... 'only' $70,000. Our combined is less than $50,000 haha, no wonder they are calling you and not me

[Arimeh]

My bank is pretty good (well the bank managers are) and they do try and assist you (and they have...errr.. fudged figures for us in the past so we could get a car loan when their computer told us not to give it to us!!! I think they forgot to put a child in the system - wooooopseeee!! LOL)

So if you get desperate - talk to my bank

[Indadhanu]

LOL the mortgage broker suggested something along those lines but then said... oh... FTB... Parenting Payment... bit obvious you have a child. He did suggest other things, but when he left we agreed he was quite the fruit loop!

Which bank?
()

[Arimeh]

Yeah I think it was Dd1 that ceased to exist on that application lol

Errr bank of queensland. In the town you were living in when I first came to your house

[Indadhanu]

Oh yeah I remember... i think, vaguely... you mentioned that bank.

[RhiChiChi]

So - does that mean that when they assess your application they use the higher interest rate, and then if you are approved you pay the lower rate?
OR do you apply for a home loan and it is assessed at the rate that you'll be paying?

LOL at the higher rate our maximum borrowing power thing comes out with repayments that are STILL less than the rent we are paying per month, it is CRAZY!

Yes, the Banks generally use what they call an 'affordability rate' as per Fuzzywuzzys post but your loan wil be contracted at the 'lower'/'negotiated'/'advertised' rate. HTH

[Indadhanu]

Yeah, St George used 8.93% at our first meeting, but the broker said they'd use a different rate on the 3 year fixed rate product. It seemed like he meant that they'll use a different rate (not the contracted rate, but not the higher rate of 8.93% they initially used, it was about half way between the advertised rate for that product and 8.93%), because he said we'd have more success getting a higher loan amount if we applied for the 3 year fixed term loan.
Trying to work out if the broker knew what he was talking about or not lol.

[RhiChiChi]

Hmm, ok I don't really know what difference it makes b/c regardless if you fix or are variable, the affordability rate (rate the loan is assessed at) is the same....Maybe he means it is more of an incentive for St George b/c you are locked in for 3 years so you won't be tempted to refinance. Sometimes people talk jargon and it is confusing...

[Fuzzywuzzy]

OR do you apply for a home loan and it is assessed at the rate that you'll be paying?

The formal approval is based on the interest rate that is on your contract documents. I have seen some bankers and mortgage brokers do some dodgy things to get loans approved even seen people sacked for it

[Indadhanu]

Ok so (sorry, financial things don't make a lot of sense in my head!) ... we got pre-approval for one amount based on their higher rate. The serviceability. It isn't a lot, the loan repayments actually come out at less than we have paid per week in rent for the last two + years, so I'm just trying to work out if that'll increase at all or if that is FIXED. Maximum they'll approve ever.

I understand that if/when we get approved for the loan it'll be for the rate on the product, whatever the product is that we choose, not on the higher 'serviceability' rate they calculated our pre-approval on. With the pre-approval they didn't ask what product we'd go for, they just used their higher rate.

So when we go for the loan, if we are pre-approved for one amount, we cannot get any more than what they assess is our serviceability? Even if the contracted interest rate is lower and assessing at the rate increases our serviceability? That's how the mortgage broker made it out to be - we'd get more money going for a different product, because they assess it at a lower rate than they assess serviceability.

This is so confusing. I think he was a total douche

[anney]

When we used a mortgage broker, he went through all the paperwork, plugged in the figures to his software and that came out with the 6 or whatever products that we qualified for and he went through the conditions/interest rates etc. on each one with us so we could make the choice. All in the initial consultation. Not sure if they all work like that.
As FW says, some of them do some dodgy things so beware!

[Fuzzywuzzy]

So when we go for the loan, if we are pre-approved for one amount, we cannot get any more than what they assess is our serviceability? Even if the contracted interest rate is lower and assessing at the rate increases our serviceability? That's how the mortgage broker made it out to be - we'd get more money going for a different product, because they assess it at a lower rate than they assess serviceability.

This is so confusing. I think he was a total douche

He is speaking the truth It is possible to borrow a higher amount if you take out a loan on a lower interest rate than your borrowing capacity was based on. If you are concerned about it, get the bank or broker to run your serviceability again based on the lower interest rate of the loan product you think you'd apply for so you have an exact figure. Generally we like to be on the safe side (ie. borrowing a little bit less than your maximum borrowing capacity) to ensure that the loan goes through no problems.

Gee, I hope that makes sense, let me know if you want me to explain it more